Systems that facilitate the payment of bills are well known. While these systems utilize a variety of components to implement a number of different procedures, they all possess some drawback that limits the flexibility of the system. To understand these various systems and their limitations, an explanatory background discussion is helpful.
Bill payments usually involve at least two parties, a payor and a payee. A payee is a person or entity that receives cash, government tender or other acceptable tender from a payor, to satisfy a bill for goods, services or obligations rendered or to be rendered to the payor or other persons. Obligations may be any type of debt owed to another and include such items as voluntary payor donations. A payor is the person or other entity that provides the funds or tender for such bill payment on behalf of itself or others. A bill may be presented at regular or irregular time intervals, may be oral or in a written format, and may take the form of a voluntary or involuntary obligation.
In most situations, the payee has the responsibility to determine the amount and due date for payment of a bill. Voluntary donations and bill payments of this nature are typical exceptions to this rule. If a bill is presented in written form it is also usually the responsibility of the payee to provide for delivery of the bill to the payor. This can be accomplished either directly between the payor and payee or indirectly through such third parties as the postal service. Once a bill is delivered to the payor it is usually the responsibility of the payor to deliver payment to the payee. This process usually involves one or more third parties. For example, if a check is deposited with the postal service it is delivered to a payee which relays it to a bank and the banking system is used to collect the payment. In its simplest form bill payment consists of the payor personally presenting cash to the payee.
Bill payment may be classified into two very general categories, positive and negative. Positive bill payments require the payor to "do something" or take a positive action before bill payment is performed. For example, positive action includes such methods as delivering cash or checks to a payee or authorizing payment of a bill by a third party by using a personal computer or telephone. Positive payment systems also include those in which a payor specifies a payment action on one date which is implemented on another date. Negative action or negative bill payment requires the payor to "do nothing" in order to pay a bill. In other words, the payor does something to "stop" a bill from being paid. Each category may be further divided into the additional sub-categories of single payee and multiple payee. Single/multiple payee category status is usually determined from the perspective of the payor. Positive pay systems, operated by a third party, are usually associated with multiple payees. Negative pay systems are usually associated with a single payee. Each of these sub-categories may be further sub-divided into additional categories such as electronic/paper, fixed/variable, provisional/final and partial/full.
The electronic/paper sub-category is usually used to define a system that principally utilizes electronic data messages to transfer funds while paper systems typically use written instruments for this purpose. The fixed/variable sub-category usually refers to whether the amount of the bill is fixed or varies for each billing cycle. Provisional/final sub-category typically indicates whether the payment action by a payor may be reversed after payment is tendered. Finally, the partial/full sub-category defines whether the payor may submit less than the full amount of the payee's bill.